Law

To transfer or not to transfer: that is the question

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) dictate that under a relevant transfer (be it a business transfer or service provision change) all employees employed in an organised grouping of employees being transferred, automatically transfer from the transferor to the transferee.

The Regulations permit employees to object to the transfer provided that objection is made known to either the transferor or transferee. That in itself is relatively straightforward, what happens next with the employee therefore depends upon the reason for the objection. Ordinarily employees would be considered to have resigned from their position however, if the objection is due to substantial detrimental changes in their terms and conditions then they can remain the responsibility of the transferor; who would then have to find them alternative employment within the company or go through a redundancy situation to carry out a fair dismissal.

What happens therefore when an employee resigns prior to the transfer and that resignation is not connected with the transfer? For example the employee simply wants to change positions or try something new. Logically one would expect the resignation to take that employee out of the group of employees being transferred resulting in the forthcoming TUPE transfer not to applying to them. It would seem reasonable to assume they would simply serve their notice and part company in the normal way. Wrong, according to the Court of Appeal in the recent case of Marcroft v Heartland (Midlands) Limited.

Facts

Here Mr Marcroft was employed by PMI, an Insurance Broker. On 15th September 2009 he resigned serving notice in line with his contract. His termination date was therefore 26th October 2009. During his notice, on 25th September 2009, Mr Marcroft was advised that PMI were transferring the commercial insurance part of their business to Heartland. Mr Marcroft was not formally consulted over the transfer and did not raise any objections. From that date until 2nd October 2009, the transfer date, Mr Marcroft did little work as he was placed on garden leave. His notice then expired on 26th October 2009 and he shortly thereafter accepted a job with a competitor. Heartlands then sought to enforce restrictive covenants contained in Mr Marcroft’s original employment contract on the basis that he had transferred under the TUPE Regulations. The original Court found that Mr Marcroft had been assigned to the transferring part of the business and despite him not being informed and consulted, he nevertheless did transfer to Heartland. Mr Marcroft appealed on the basis that he had only been temporarily assigned, at the time of the transfer, to the economic entity being transferred and that his right to object to the transfer had not been acknowledged by Heartland.

The Court of Appeal held that despite his resignation, he was temporarily assigned to the transferring entity and as he had been informed about the transfer but never formally objected, he had in fact transferred. Lord Justice Mummery held that whilst it was not the intention by either party for the TUPE Regulations to apply, their intention was irrelevant under the TUPE Regulations. The purpose of which is to provide protection to employees so that once it is provided it must not only protect the employees right but also any burdens he has under the contract. In this case the Judge found had the transfer not taken place Mr Marcroft would still have been bound by the terms and conditions of his contract with PMI in relation to the restrictive covenants.

Comment

This is a warning to employers therefore that in the event that you receive a resignation prior to a transfer those employees should still be included in informing and consulting with the affected work force, with a view to them still transferring. Unless employees specifically object to the transfer then case law has now established that they will automatically transfer to the transferee.